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EXECUTIVE SUMMARY:
The objectives of this review were to ascertain whether (1) Medicaid payments to Nashville Metropolitan Bordeaux Hospital, Long-Term-Care Unit (Bordeaux) were adequate to cover its operating costs and (2) a link could be drawn between the quality of care that Bordeaux provided to its residents and the amount of Medicaid funding received. We found that total, or gross, Medicaid payments to Bordeaux were adequate to cover Medicaid-related costs, but net payments were not. During the 3 years ended June 30, 2002, Bordeaux’s Medicaid operating costs were about $62.5 million. During the same period, gross Medicaid payments totaled $139.8 million- $35.3 million in per diem payments and $104.5 million in enhanced payments available under the upper-payment-limit regulations. However, the State established per diem rates that were significantly lower than actual costs, and the county required Bordeaux to return about 96 percent of its upper-payment-limit funding. Accordingly, the Medicaid funding that Bordeaux retained was $22.8 million less than its total Medicaid operating costs. As designed, the State’s upper-payment-limit funding approach using intergovernmental transfers benefited the State and the county more than Bordeaux. We are concerned that the Federal Government provided all of Bordeaux’s Medicaid funding, contrary to the principle that Medicaid is a shared responsibility of the Federal and State Governments. Another result was that Bordeaux did not retain enough Medicaid funding to fill all of its nursing positions, which may have affected the quality of care provided to its residents. We recommended that the State (1) consider revising Bordeaux’s Medicaid per diem rate to more closely reflect operating costs, and (2) allow Bordeaux to retain sufficient funding to cover the costs of providing an adequate level of care to its residents. The State did not agree with our conclusions and recommendations.